How to calculate the value of SEO for a small business - Cheap SEO Shop

14 May 2018
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SEO
Small Business
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When you’re running a large business website, it can be frustrating to talk about SEO, with it’s many layers, subdomains, business units, poor analytics setup, etc. But it can even be more frustrating talking about SEO for a small business, with practically zero traffic and no data to back up any major decision.

SEO often seems like an obscure art form or a bag of tricks. From understanding what really is SEO, to learning abut the structure of a website, to understanding the many Google ranking factors. SEO is not an easy to grasp subject to begin with. Much less understanding if SEO is worth it for a small business.

But still, SEO is not very different than good old business practices. Among these we can talk about:

  • Providing appropriate information to your customers.
  • Giving to notch customer service.
  • Providing valuable, honest feedback.
  • Offering products/services in an organized manner.
  • Selling quality items if you’re in the business of good, or selling quality services if you’re not.
  • And even, having great managerial skills and an efficient, trained team.

All these factors come into play when you talk about running a business. And pretty much, similar factors come at hand when you’re executing an SEO plan.

But the topic of this post is not necessarily about the commonalities between SEO and real businesses. The main topic about this post is abut how to calculate the value of SEO. In other words, how much can / should you invest in your small business SEO efforts.

What is the value of SEO?

Let’s first understand how to measure SEO before be elaborate in how it can impact your small business.

There is a simple equation that can help you determine the value of SEO. This analysis is based on Adwords but in general it provides a really good idea on how to value your SEO. In other words, it can show you how much should you pay for SEO while expecting a good return in your investment (ROI).

In order to calculate your SEO ROI you must multiply your keyword search volume by the expected click-through rate times the average conversion rate times average order value.

SEO for a small business ROI Formula

SEO ROI Formula. Keyword search volume x Expected CTR x Avg. conversion rate x Avg. Order value = SEO ROI.

Let’s elaborate on each item of the former equation.

1) Keyword Search Volume

Keyword search volume is the number of times each keyword is searched for in Google month to month. While it is possible to obtain this data for each month, and thus identify trending months. The best practice is usually to take the normal monthly average searches for your given keyword.

Let’s say I want to rank this website for ‘cheap seo company’. We’ll use Google’s Keyword Planner and get the search volume for our chosen keyword.

Keyword planner Av. monthly searches

Keyword planner Av. monthly searches for “cheap seo * [keywords]”

Now, in the good ol Google days you would just enter your desired keyword into Google’s Keyword tool and get a pretty accurate search volume. Recently Google decided it was not going to be sharing this information directly. Or at least, not so transparently. They now are grouping search volume data into clusters, eg. 10 – 100, 100 – 1k, 1k – 10k, 10k – 100k, 100k – 1M, etc.

Now, targeting a keyword with over 100 searches a month would not necessarily produce as many leads as a keyword with over 900 searches per month. While both keywords would fit Keyword Planner range of 100 – 1k. It’s obvious one could potentially produce 10x better results or slightly less. So it’s important to get a number as accurate as possible.

Fortunately, there’s a variety of tools to help you gather search volume data, including: Ubersuggest, LongTailPro, Ahrefs, SEMrush, KWFinder, etc. In our example, ‘cheap seo company’ receives 170 searches a month in the US desktop database, according to both Ubersuggest and LongTailPro. But it gets 330 according to Ahrefs global database. Just something to keep in mind when estimating your search volume.

It’s also important to mention that Ahrefs aggregates search volume from all search engines and devices (Bing, Yahoo, DuckDuckGo, etc), which explains the slight difference in US volume.

Ubersuggest's search volume data

Ubersuggest’s search volume data

Long Tail Pro search volume data

Long Tail Pro search volume data

Ahrefs search volume data

Ahrefs search volume data

While the data may not be 100% exact, you can get a close number, it can also give you some clues regarding competitiveness and trends. In the end, you’ll get a close estimate of how much traffic you can expect and how hard it will be to rank for your keyword.

2) Expected click-through rate

Now, search volume alone is not helpful unless you consider the chances each box in the SERP receives. You may remember our SERPs explanation. As you learned from our example, each search result will get an approximate number of clicks. This number is available from Google Adwords, but it’s more easily accessible based on a probability chart made by Advanced Web Ranking.

Advanced Web Ranking CTR study - Feb 2018

Advanced Web Ranking CTR study – Feb 2018

What we get from this chart is that first page ranking will get approximately 27% clicks of a given search volume keyword, while 2nd result will only receive 13% clicks on average, and so forth.

Going back to our ‘cheap seo company’ keyword example. Ranking on first spot for it would approximately yield us 54 clicks (200 search volume x 0.27 chance = 54 clicks ) on average, per month. Now, that number may or may not be much, depending on your expectations and customer value. But it’s a generally acceptable number, as it means an average of 2 visitors per day, for a single keyword.

There seems to be no general consensus on the accuracy of these CTR numbers. But considering different monthly data, you’ll get averages ranging from 25 to 35% for the first spot.

You can also assume to receive a <1% chance for any search result in page two or more in the SERPs. ¯\_(ツ)_/¯

3) Average conversion rate

This metric, often forgotten by small businesses, refers to how many visitors can turn into leads, clients, sales, etc. Or, to be more specific, it refers to your goals and objectives conversion rate.

Let’s elaborate on this. Out of X number of visitors, how many are signing up? filling up a contact form? registering for your event? booking an appointment? buying a product/service? etc.

The usual conversion rates range from 0.5% to 10% or even 30% for some niche and highly qualified searches.

Depending on your situation and on your Analytics goal setup, you’re going to include this in your SEO ROI equation when evaluating your investment.

Analytics goal setup

Analytics goal setup

4) Average order value

Finally, depending on your site type, you should know how much is a new customer worth to you. If you’re an ecommerce site, then you can estimate your customer value by averaging your total sales figure by the number of customers.

That’s a really rough estimate that should only be done in cases where you don’t know the exact figure or don’t have enough information to have a better estimate.

If you’re a lead generation site selling a $99 course, then that’s your customer value, or average order value. Same thing if you’re a membership site. The value of your membership would be your average order value.

Now, once you have all these important numbers, you can accurately measure the value of SEO for your website.

In our case, our SEO ROI calculation for ‘cheap seo company‘ keyword would be:

keyword search volume = 200 (global)

expected click-through rate = 10% (3rd place)

average conversion rate = 1% (industry average)

average order value = $99 (Full SEO Audit)

200 x 0.10 x 0.01 x 99 = $19.8

What does $19.8 mean? It means we’ll get $19.8 in revenue by ranking in number 3 for the keyword ‘cheap seo company’. But, if we were ranking in number 1 spot for the same keyword, then we would get 200 x 30% x 1% x $99 = $59.4. That’s $59.4 revenue per month for No. 1 ranking for a single keyword!

Most websites rank for a variety of keywords, so in general you can assume to get at least 10-20 ranking keywords with improving rankings over time for every keyword that you’re targeting. Of course, this is assuming you’ll be doing your SEO homework properly!

So, to recap, depending on our keyword research, our small business would probably be ranking for say, 20 keywords, each roughly averaging 150 searches a month, with an averaged 10% CTR , and a 1% conversion rate for a $99 average order value. In other words:

20 x 150 x 0.10 x 0.01 x 99 = $297

That may or may not be our monthly revenue projection for this website. But, whatever we spend in SEO, based in those figures, we either stay below this $300/mo threshold, or we expect to have increasing numbers in the number of keywords as well as CTR and conversion rates.

Visigility has put up a nice chart detailing how many clicks you can expect to receive from a #1 position, along with the related CPC costs and in general how to obtain a positive ROI from SEO for a small business.

The value of a #1 organic ranking

The value of a #1 organic ranking

Is SEO For a Small Business Worth it?

When it comes to measuring the value of SEO for a small business, you need to first understand the importance of properly measuring the life time value (LTV) of a new customer. Then you’ll need to identify the traffic potential for your small business by doing keyword research. Finally, decide whether it’ll provide more business if ranking in page 1.

Here’s some additional resources if you’re still looking.

 

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